Friday, July 13, 2012

Traitor to His Class

This week I'm finishing up Traitor to His Class, H.W. Brands' biography of FDR. I know very little about FDR and the New Deal so I'll have to read some other stuff, but this is a good place to start. It's extremely well written, though I found myself wanting more context, especially in economic matters. He describes all the main New Deal programs but is surprisingly sparse in his discussion of the economic problems they were designed to solve and, indeed, of whether they did solve them. Beyond knowing that things were bad, you don't get a good sense of economic changes during the 1930s.

One of the things that stands out to me is that in economic matters Roosevelt was far to the left of any current political figure, including President Obama. To the hard right, of course, President Obama is a socialist, which I guess makes FDR a full-fledged communist or something. Of course he was nothing of the sort; he lived at a time when communism was a real thing and people could see the difference. It is easier now to paint Obama as a radical because fewer and fewer Americans remember a time when there were actual radicals around.

The right does tend to see the New Deal as the time we lost our constitutional moorings, but we made it through; it's not as if it was the end of freedom. Conservatives ought to stop hyperventilating and remember that they survived a much more radical presidency than the one Obama is delivering.

One of the fascinating things about the New Deal is that it was happening during a time of flux in economic theory. When Roosevelt came into office Keynes had not yet published his General Theory of Employment, Interest, and Money and there wasn't really any consensus about how to respond to a collapse in demand in a modern consumer economy. So the New Deal was kind of a grab bag of stuff, and Roosevelt's economic understanding seems to have been rather muddled. But he was an extremely aggressive pragmatist. Throw a bunch of stuff against the wall and see what sticks.

A program that thankfully didn't stick was the National Recovery Administration. Before it was struck down by the supreme court, the NRA allowed the federal government to collude with big business and labor to set prices and labor costs. As Brands writes, it amounted to the cartelization of the American economy, and it threatened to crowd out small and new businesses who would traditionally try to enter the market by underselling their competitors. In the world of the NRA, innovation and competition were bad, cooperation was good.

The American economy desperately needed inflation, but it is difficult to see how the NRA was an effective response to that need, even in the short term. And over a longer time horizon, it's easy enough to imagine the NRA having a devastating effect on growth and innovation in the economy. Thankfully, the supreme court ruled it unconstitutional. But it is in the NRA that we see most clearly the confused economic thinking of the era. The diagnosis was correct: deflation is killing us; we need to raise prices. But instead of doing that by running deficits to increase demand, they tried to arbitrarily set higher prices.

Those on the right who think the New Deal didn't just have some missteps but was an overall assault on freedom and the constitution are not grappling with just how desperate things were in the 1930s. Roosevelt was being pulled to his left and capitalism itself was on the brink. Had he continued the do nothing policy of Hoover, revolution was a real possibility. In such an emergency, it was not enough to appeal to constitutional niceties. Republican Senator William Borah lamented the program his party presented to Americans in 1936: "They are offered the constitution. But the people can't eat the constitution."